January 2018

Organizing for the age

of urgency
To compete at the speed of digital, you need to unleash your strategy,
your structure, and your people.

by Aaron De Smet and Chris Gagnon

Congratulations! Your organization is performing at or near the top of

its game, or it has been in the recent past. Perhaps even better, you have a
strategy to improve in the near future. Now for the bad news: the good news
won’t last.

It can’t—at least without the right kind of organization. Across industries,

barely half of the top performers sustain their leadership position over the
course of a decade, according to research by our colleagues in McKinsey’s
Strategy Practice. The challenges in maintaining dominance are not new;
even sectors that digitization has not consigned to oblivion have seen
flagships such as Delta Airlines, General Motors, and Owens Corning move
from the top into Chapter 11 and then back into leadership positions again.

But of course, technology is changing everything. As digitization, advanced

analytics, and artificial intelligence (AI) sweep across industries and
geographies, they aren’t just reshaping the competitive landscape; they’re
redefining the organizational imperative: adapt or die. The average large
firm reorganizes every two to three years, and the average reorganization
takes more than 18 months to implement. Wait and see is not an option; it’s a
death sentence.
 As a result, companies are beginning to experiment with increasingly radical
approaches. We’re struck by a commonality among those who get it right:
they create adaptive, fast-moving organizations that can respond quickly
and flexibly to new opportunities and challenges as they arise. In doing so,
they’re moving intelligent decision making to the front lines. That’s in sharp
contrast to the standard, “safer” modus operandi of capturing data, moving
it up a hierarchal chain, centrally analyzing it, and sending guidance back.
Several of these forward-thinking organizations now starkly describe their
decision making as being pushed to the “edges”—to and beyond employees,
past the organization’s four walls, and out to consumers and partners. The
process functions more like a network and less like a chain of command.

In this article, we’ll share these emerging elements of the organization of

the future. While there is no set formula for success, we’ve seen versions of
these elements at so many companies that we think they provide at least the
organizational outline to win (Exhibit 1). Along the way, we’ll try to dispel
some common misconceptions (too risky! too inefficient! too time consuming
to set up!) of what such an organization really means. We know you don’t
want your company to undergo yet another reorg—and another one a few
years after that. Consider this a road map out.

QWeb 2017
Organizing for urgency
Exhibit 1 of 2
Exhibit 1

Organizing for urgency

• Adopt a recipe
to run the place
• Cultivate purpose,
Identity values, and social
connection

Urgency

• Worship speed
• Shift to emergent
strategy

Agility Capability

• Unleash decision • Personalize talent

making programs
• Reimagine your • Rethink your
structure leadership model

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 THE URGENCY IMPERATIVE
A good road map can come with callouts and suggestions, and here’s our
first: floor it. When you compete in a marketplace that moves so quickly, the
default outcome is to fall behind. If your organization is to have any hope
of keeping up, it will need to be reconceived as fast, quick to turn, and even
quicker to emerge from rapid pit stops and tune-ups. One could almost
analogize to a race car—almost, because race cars typically run on a fixed
track toward a clear finish line. Your organization’s race, by comparison, is
toward an unknowable destination. And that race doesn’t end.

Worship speed
At the highest-performing companies, speed is the objective function, the
operating model, and the cultural bias. And more: speed is an imperative.
Walk the halls of leading organizations, and you’ll repeatedly hear
catchphrases such as “energy,” “metabolic rate,” “bias for action,” and
“clock speed.” Jeff Bezos, in his April 2017 letter to Amazon shareholders,
highlights making not just “high-quality” decisions but “high-velocity”
decisions. They go hand in hand. “Most decisions,” writes Bezos, “should
probably be made with somewhere around 70 percent of the information you
wish you had. If you wait for 90 percent, in most cases you’re probably being
slow.” Choosing not to fail fast comes at a price. “If you’re good at course
correcting,” Bezos continues, “being wrong may be less costly than you think,
whereas being slow is going to be expensive for sure.”1

Shift to emergent strategy

Tacking and readjusting quickly are essential, even if the destination
is uncertain. In fact, because the destination is uncertain you need an
“emergent strategy,” which entails a relentless quest and not a defined end
point. The pursuit itself should be a firm’s North Star—a questioning of “how
do we add value” that’s unceasing but also unsolved, open to exactly how that
manifests in terms of specific opportunities and actions.

Too often, decisions about how to create value are made from on high and
tend to be “one and done.” They’re implemented by means of top-down
planning, frontline execution, frontline reporting back up the ladder, top-
down analysis of gaps, top-down replanning and pushing down mandates
to fill those gaps, frontline reexecution, and repeating it all again—a
process much too slow and mechanistic to keep up with real-world change.
That’s particularly the case in organizations with a number of “clay

1
Jeffrey P. Bezos, “2016 letter to shareholders,” April 12, 2017, https://www.amazon.com/p/feature/z6o9g6sysxur57t.

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 layers” of middle management, where officers feel compelled to add value
by refining, augmenting, synthesizing, piling on, micromanaging, and
adjusting information that passes their way—and where personal incentives
and cognitive biases inadvertently give rise to hockey-stick forecasts,
sandbagging, and poor decision making.

Our colleagues in McKinsey’s Strategy Practice have just written a book,

Strategy Beyond the Hockey Stick (Wiley, 2018), about how to tame this “social
side” of strategy. By understanding the real odds (long) of breaking out from
the pack, by making a consistent series of big moves, and by treating these
steps as a journey that doesn’t end, they show that companies can make strategic
breakthroughs. (For more, see “Strategy to beat the odds,” forthcoming on
McKinsey.com.)

Such an approach requires an organizational platform that allows for an

emergent mix of multiple strategies to be formulated and carried out in real
time. If the old world was a master composer like Mozart, planning every
detail for every instrument, the new world is improvisational jazz. But
even older cats can jam. One global chemical manufacturer, for example,
had originally been conceived, decades ago, to commercialize a singular
scientific breakthrough. When challenged, decades later, to dig deeper
into how the company had actually realized high returns after its founding
period had passed, leadership discovered that the business’s biggest
moneymakers were consistently the result of incremental, close-to-the-
customer applications. Many of those value-creating innovations had sprung
from learning by doing, improvising, and improving—and getting by on a
shoestring. In fact, upon further analysis, the company realized that it had
been starving incremental (but high-impact) innovation for the new New
Thing, with poor returns on investment too often the result. Grasping that
insight, leadership decided to flip its resource allocation almost completely.
That fundamental shift, hitching its star to emergent strategy, has since
generated outperforming value for more than a half dozen years.

AGILITY
The principles behind organizational agility have been around for decades.
In its current, most mainstream form, agility is a DevOps description of
how IT teams form to address problems, sprint toward solutions, and then
reconstitute to work on new challenges. These approaches have made
“agile” practical and concrete, and they’ve given rise to broader applications
yielding transformative impact across an entire enterprise. Much like agile
software development helps meet the challenge of producing an application

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 that is already obsolete when finally launched, enterprise agility helps
solve the problem of an organization’s strategies, resources, structures, and
capabilities being obsolete by the time they’re finally operational.

Organizing for urgency calls for organizing differently (Exhibit 2). The
urgency imperative places a premium on agility: it enables the shift to
emergent strategy, while unleashing your people so they can reshape your
business in real time. It’s also a powerful means of minimizing confusion
and complexity in our world of rapid-fire digital communications where
everyone can talk with everyone else—and will, gumming up the works if you
don’t have a sensible set of operating norms in place. Agility is also the ideal
way to integrate the power of machine-made decisions, which are going to
become increasingly important to your fundamental decision system.

Unleash decision making

In a competitive environment that’s changing so rapidly and so profoundly,
can any single individual keep up? Not in isolation, and certainly not from
the top down. But the right kind of organization—one that taps into a
network of individuals, recognizes the outperformance and resilience that
a diverse workforce will provide, and deploys technology aggressively and
purposefully—can.

To understand how, tap into your own decision system—the human brain—
and consider how people actually decide. While neuroscientists can identify
specific parts of the brain that are more active under certain circumstances,
it’s never the case that one discrete neuron, alone, is determinative. Rather,
intelligence is an emergent property of the whole system, and every person’s
“decision system” is a network of multiple, small, iterative processes honed
naturally over time.

That’s not to say all decisions are created equal; they are anything but, and a
failure to categorize often contributes to inefficient or ineffective decision
making. In our experience, the best way to understand decisions is to
conceive of them as part of a four-category taxonomy. The highest level of
decision making, we’d submit, comprises the decisions about how to decide.
Call this meta–decision making “greenhouse design.” It involves choosing
the foundational elements—the structures, governance arrangements, and
processes—that define how your organization operates and reflect its core
value proposition. This platform, in turn, supports looser, more dynamic
elements that can be adapted quickly in the face of new challenges and
opportunities. The CEO is absolutely essential for this organizational

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 QWeb 2017
Organizing for urgency
Exhibit 2 of 2
Exhibit 2
Organizing for urgency calls for organizing differently.

Urgency From To

Making a decision when you Making a decision once you have

Worship speed
have 90% of the information 70% of the information

Shift to emergent Setting your objective as a Realizing your objective is a relentless,

strategy predicted outcome purposeful pursuit of value creation

Agility From To

Unleash decision Imposing decisions from the Encouraging real-time decisions

making top down at the edges of your organization

Maintaining a hierarchal chain Creating a flatter organization

Reimagine of command, with decision-making
your structure and decoupling title or rank from
authority coupled to control day-to-day control

Capability From To

Personalize Offering generalized training for Customizing training for the individual,
talent programs the “average” employee in part by using advanced analytics

Rethink your Elevating charismatic leaders Recognizing that leadership can come
leadership model who get results by force from anyone, regardless of title, and is
earned, not appointed

Identity From To

Adopt a recipe Sampling strategy à la carte Sticking to a strategic prix fixe to select
from a wide array of approaches the one approach that best matches
to run the place
and methodologies how you create value

Cultivate purpose, Conceiving of your

values, and social Aligning the individuals in your
organization as a collection
connection enterprise around common principles
of roles and processes

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 “platform definition,” which is why some leading executives describe
themselves as “gardeners,” “city planners,” or “architects,” rather than
“operators” or even “strategists.”

The second category of decision making is “big-bet decisions.” These

infrequent and high-risk decisions have the potential to shape the future
of your company. Examples include major acquisitions and game-changing
capital investments—both high stakes and inherently risky. Organizations
that do well in this decision category focus not only on debiasing but also on
designating a single executive sponsor, atomizing decision components into
identifiable and more easily solvable parts, standardizing a decision-making
approach, and moving as fast as possible. Time, after all, is of the essence.

Less conspicuous but still high stakes are determinations in a third category:
“cross-cutting decisions.” These often look like big decisions but are actually
a series of smaller, interconnected choices made by different groups and
individuals as part of a collaborative, end-to-end decision process. Such
decisions include pricing, sales and operations planning (S&OP), new-product
launches, and portfolio management. These types of determinations are
necessarily cross-functional and often highly iterative. The challenge is to
bring together multiple parties who often have different priorities, so they can
provide the right input at the right time, without bureaucratic watering down.

The final category is made up of determinations that are pushed out to the
edges of your organization. These are the “delegated decisions” and “ad hoc
decisions.” Delegated decisions are high frequency and low risk (in other
words, even if long-term impact is high, bad decisions can be undone or
corrected long before significant consequences arise). They can be handled
effectively by an individual or a small natural working team, with limited
input from other parts of the organization. Such decisions also increasingly
can be delegated to algorithms (think instant recommendations on YouTube
or route planning at UPS). Ad hoc decisions are less frequent but still low stakes;
they arise unexpectedly, but frontline employee judgment should be supported
by more senior managers through an ethos that Jeff Bezos calls “disagree
and commit” and Zappos’s Tony Hsieh encourages as “safe enough to try.”

Reimagine your structure

The more interconnected your organization, and the more that decision
making can be diffused, the easier it will be to sustain high performance in
a world of uncertainty, speed, and disruption. Accelerating, unpredictable,

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 and shifting currents of information are precisely not what a tall command
chain is designed to confront, especially in a turbulent external environment.
Those dynamics can render your firm’s advantages in numbers, tools, and
training irrelevant. That’s a key reason why even the most hierarchical chain
of command—the US military—moved to decentralize decision authority to
help beat back Al Qaeda’s Iraqi-based forces.2

Of course, hierarchies will continue to exist, and it’s right that certain
functions (think risk management, legal, treasury) should be centralized.
In a world growing more complex by the moment, there are compelling
reasons for strata of specializations and subspecializations—the very sort of
dedicated expertise that should be teamed for what we’ve described earlier as
cross-cutting decisions. “Flattening,” without more, is not a comprehensive fix.

What does work is to free your initiatives and decisions from the
constraining hands of unnecessary hierarchy. While some level of
prioritization and resource allocation must be coordinated centrally, many
actions and decisions are best taken where the work is done at the front line,
close to the customer. To pull that off, eliminate superfluous management
levels, decouple decisions from control, and let go.

That calls for getting serious about letting your sensors, machine and human,
work their shared mojo as information providers and decision makers. The
human element is not a feel-good add-on. Winning organizations—from
the 2017 World Series Champion Houston Astros, who value player “heart”
and talent evaluator intuition, to Zappos, whose passionate customer-
service agents have cultivated a passionately loyal customer base—are
analytics powerhouses, but they rely on inspired individuals to outpace the
competition. These organization have also figured out that flatter makes
it much easier to operate in agile ways, to speed information along, and
to integrate disparate sources of it in ways that boost the odds of making
decisions that serve the interests of the company as a whole, not just of
isolated, self-interested cells.

CAPABILITY
In order to operate with urgency and pursue the agility that makes high
performance possible, you’re likely going to have to fill some serious
capability gaps along the way. What’s more, many of the critical skills your
people need—as individuals, team members, and leaders—are changing

2
 eneral Stanley McChrystal, Tantum Collins, David Silverman, and Chris Fussell, Team of Teams: New Rules of
G
Engagement for a Complex World, New York: Portfolio, 2015.

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 rapidly as a result of workplace automation and AI. As less complex work
becomes increasingly automated, workers will need to be able not just to
perform in concert with machines but also to adapt to uncertainty. And
the more that information-rich tools are used (and the more effective
they become), the harder it will be to achieve the proper balance between
person and machine—a challenge that amplifies, in turn, the importance of
continuous learning, employee development, and consistent leadership.

Personalize talent programs

When direction comes primarily from “the boss,” your company will need
more bosses to keep on course. That’s one reason so many organizations
are too tall and bureaucratic. But if capabilities bubble up from within, and
learning is personalized for individuals and not the masses, employees can
act more urgently and, usually, more effectively.

Fortunately, organizations are gaining new tools—especially in people

analytics—that will enable them to manage and develop their people with
greater precision than ever before. Examples include a fast-food restaurant
chain that, after extensive testing, was able to identify and teach behaviors
that would inspire colleagues; rigorous research and statistical analyses used
by Alphabet to inform (but not replace) its engineers’ human judgment about
people decisions; and, in the case of one insurer, identifying which employees
would benefit most from which types of learning opportunities.

Rethink your leadership model

Central to talent development is a company’s leadership model. Leadership
can come from anyone, not just from those in positions of formal authority.
Think about your own firm: sometimes an employee can be a leader and
sometimes a follower, because while no one employee knows everything,
many are likely at the leading edge of something. What’s more, leaders in
agile organizations lead less by control than by influence. In one workshop
we frequently conduct, we ask executives how they would solve a given issue.
Most are direct—they identify the problem and then fix it. A smaller group
will drill down to the problem’s root cause and fix that instead. Only a very
few take a more holistic approach; they consider how to create the conditions
in which an ecosystem can be largely self-managing, where individuals and
tools can learn and problems can be avoided before they manifest.

This, we believe, is what the urgency and uncertainty of the competitive

future will demand. The traditional model of a charismatic leader who
gets results by force of will has long proved expensive and is fast becoming
outdated. Leaders should strive, instead, to empower the organization as a

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 whole, to be felt but not seen, to be inspiring but not indispensable—and not
to insist that everyone else should be just like them. Such leadership rests on
the ability to adapt and on congruence with the essence of your organization.

IDENTITY
All of which leads into a fundamental challenge for urgency: If you build this
kind of “control light” organization, and it’s moving that fast—how do you
keep your bullet train from running off the rails? Our research shows that
speed needs to be channeled into stable processes, tasks, and roles if you’re
going to stay healthy as you move quickly. Realistically, lots of those sources
of stability are going to get upended by workplace automation, as we’ve noted
before. As well, operating with the urgency and agility we’re describing,
and overhauling organizational capabilities constantly to keep and exceed
competitive pace, can seem unsettling. And resource reallocation plainly
changes people’s lives. It’s hard, therefore, to keep your organization pulling
together when there’s so much ambiguity, so much shifting around, and too
little sense of why.

Adopt a recipe to run the place

While there’s no pat answer to this uncertainty, following a clear recipe
is an effective way to start. By its very definition, a recipe is a defined set
of conditions and constraints. In siloed firms, one sees a wide array of
processes and practices, executed in dramatically different fashion across
the organization (and sometimes within the same silo). It makes for an
incongruous hash, with ingredients from management books over the last 20
years—a pinch of this and a dash of that.

By contrast, the healthiest firms—those most capable of sustaining

performance and renewing over time—have a much simpler approach: they
don’t sample à la carte. Our research shows that four distinct recipes are
particularly effective, and having the discipline to stick with any one of them
is critical. In fact, organizational discipline is one of the foundations of both
corporate health and operational performance.

Nor are “health” and “operational results” binary choices. To keep from
losing their way, organizations must prioritize both at all times. That adds up
to a virtuous cycle that accelerates and enhances performance, even for fairly
mundane initiatives such as squeezing a bit more margin from better pricing
or lowering costs through more effective procurement. It also helps ground
the company and the people who comprise it, even in times of momentous change.

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 Cultivate purpose, values, and social connection
If you conceive of your organization as more than just a collection of roles and
processes, you’ll be far more prepared for the uncertainty ahead. Aligning
around common principles is a large part of what an organization of the
future is all about: participants making decisions under defined rules of
engagement, collaborating to create value, and earning the credibility to lead
rather than having “leadership” be imposed from on high.

Employees reach higher when their energies are channeled toward a higher
purpose. Because different people find inspiration from different sources, it
takes range to strike a chord that will resonate with almost everyone. Smart
organizations hit every note—and mean it. That calls for walking the talk in,
among other areas, race and gender diversity, social impact, and diversity
of political expression. Some employees are most inspired by personal
development (and, it must be said, monetary compensation); others find
passion in objectives geared more toward their working team, the company
as a whole, its customers, and even society at large. Cultivating purpose
requires you to sharpen your organization’s sense of mission and strengthen
your employees’ social connection.

There’s an old quip that “everybody talks about the weather, but nobody
does anything about it.” With reorganizations, it’s too often the reverse:
everybody does a reorg, but nobody likes to talk about it. That’s because
reorganizations are hard to get right, distract everybody from senior
leadership on down, and have real consequences for meeting investor
expectations. And even if you’re game for continual top-down revisions,
mantras such as “The only constant around here is change!” run the risk of
bewildering employees.

Ironically, shifting to urgency can stave off the ceaseless reorganization

cycling. In the face of today’s massive disruptions, an ethos of urgency
actually serves to smooth gyrations between “hurry up” and “settle in.” Of
course, urgency alone can also be a recipe for dysfunction. But combine
urgency with agility, capability, and identity, and you’ve got an organization
that can play fast and long. The future will be both.

Aaron De Smet is a senior partner in McKinsey’s Houston office, and Chris Gagnon is a senior
partner in the New Jersey office.

Copyright © 2018 McKinsey & Company. All rights reserved.

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